$40m confidence boost

The sheer size of Tui Products' new building at Te Maunga dwarfs site foreman James Reynolds. Photo / John Borren

The value of consents issued for new houses in Tauranga has again surged to levels not seen since the global credit crunch sent the building industry into recession five years ago.

It was part of a confidence-boosting big picture in which consents issued for all buildings last month hit nearly $40 million - led by the huge $9 million consent for the Tui Products building near Baypark Stadium.

Houses comprised $24.2 million of the business, only $3 million below October 2007, when the market was buoyant. Consents for new houses peaked at a post-recession high of $30 million in July this year, followed by $26 million in August.

The latest figures for October showed that although the 84 consents were 21 fewer than a year ago, the houses being built were more expensive. Last October's consents were worth $2.5 million less.

The other sign confidence had returned to the market was the 207 consents received by the council in October - up 14 per cent on a year earlier and including 95 for new houses.

Tauranga Master Builders president Brian Foster, of Alterations Plus, said a lot of the business was going to group housing companies. "But having said that, it does flow on to all the other sectors, like commercial builders. Most of the guys seem to be reasonably steady, if not flat out."

However, questions remained on the impact of the Reserve Bank's new loan-to-value ratios which restricted the amount banks could lend for homes and its impact on the building industry in the next few months.

Mr Foster understood that the requirement for a 20 per cent deposit had dried up lending. It had led to young families trying to get into their first home pitching in with 10 per cent of the deposit, with some banks drafting loan agreements in which the family members were repaid first, say over five years.

A joint venture partner in the development of the Tui Products building, Steve Birkhead of Wallace Development Company, said the consent was handled in two phases to accommodate the major change in national fire codes which took effect in April.

The first consent issued in March was for the $1.1 million bare bones of the building that covered the equivalent of nearly two rugby fields. Mr Birkhead said they wanted to make the new building as compliant as possible with the new code. It meant reviewing the design to the satisfaction of two fire engineers and the council. Everything had chugged along without undue hassles.

The building's future ownership was now subject to the launching of a new unlisted fund focusing on investment in commercial property in the Bay of Plenty.

The Tui Products building will be the first acquisition of Tauranga-based Pacific Property Fund, which is targeting retail investors by an initial public offering of $7.8 million - primarily to help fund the acquisition of the Tui building. Tui will lease the site for 20 years, with two 10-year rights of renewal, beginning with a net rental of $1 million.